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Green deal: impact of climate policy on investments

By Hans Bevers - Chief Economist
Climate change is a hot topic today. One of the consequences of the corona pandemic is that the general public is also paying more attention to the consequences of global warming and the quality of life. At the same time, we are seeing an awareness among policymakers, who are formulating ever-stricter ambitions to become climate neutral. In this video, we take a closer look at these climate plans and their impact on different levels such as investment, stocks & bonds, innovation, and digitization, together with Hans Bevers, Chief Economist at Degroof Petercam.

Corona boosts climate plans

Scientists have been warning about the effects of greenhouse gases on our climate since the 1970s. Over the past decade, a great deal has been invested in sustainable, green initiatives and stocks and bonds, but we see that the corona crisis is also causing an acceleration in this area. Europe has sharpened its ambitions, in the US President Joe Biden is putting climate back on the agenda and other countries such as Japan, South Korea or Canada are also making new plans. In a new research note from Degroof Petercam, we discuss these matters in detail.

EU, US, and China responsible for half of all emissions

It’s important to note that the EU, the US, and China together are responsible for about half of global greenhouse gas emissions. Europe wants to invest heavily by 2030 through the multi-year budget, the Next Generation Fund but also through national initiatives. Think of renewable energy, batteries, hydrogen but also renovation of buildings for example. And soon the Commission will also announce a proposal for a tax on the import of polluting products. By 2050 at the latest, the European Union wants to be climate neutral.

US: Climate targets priority for Biden

In the US we see that Joe Biden has high ambitions: there is the return to the Paris Accords, the appointment of John Kerry as a special climate envoy, and the ambition to be carbon neutral by 2050. Biden is making plans to spend $2,000 billion on sustainable infrastructure, but that investment program still has a long way to go before a political agreement is reached.

China: coal important in the short term

There is also an improvement on the climate front in China. Although coal remains important for the Chinese economy in the short term. Still, Beijing has announced that it will increase efforts to become climate neutral by 2060.

Innovation requires a paradigm shift

To achieve all these ambitions, a lot of innovation is still needed. Not only in renewable energy and electrification of traffic, but also in the building sector, aviation, and so on. Technologies to capture and reuse CO2 will be a necessity, and a CO2 tax will also have to speed up the process. We are talking about a paradigm shift to convert the high ambitions into practice.
This can of course have a significant economic impact, but we must be careful to make big predictions about it at this stage. The available research from Joe Stiglitz and Nicolas Stern, for example, expects clear positive leverage through investments in infrastructure and innovation. This should also be good news for employment since a lot of these projects are labor-intensive.

Sustainability is here to stay

So it is clear that policymakers are gaining momentum in the fight against global warming. Analysts and fund managers are taking this movement into account: sustainability is here to stay, it is a structural trend that will continue. And that has an impact on the valuation of stocks and bonds.

Digitization and modernization of economy equally important

At the same time, climate plans go hand in hand with other socio-economic challenges such as the digitalization of our economy and the modernization of our industry. Europe, the US, and China all have ambitions to become leading players in new technologies, including climate-related solutions. We consider all these aspects in a well-managed and diversified investment portfolio.

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